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Nasty Neighbors Can Negatively Impact Property Values

Posted On: January 31st, 2013 - 11:27 pm

A bad neighbor can bring down the value of a home, possibly by even up to 10 percent, according to the Appraisal Institute, the nation’s largest professional association of real estate appraisers. It cautioned residential real estate owners and potential homebuyers that these needling neighborhood nasties routinely reduce nearby property values significantly.

Homeowners with annoying pets, unkempt yards, unpleasant odors, loud music, dangerous trees and limbs, or poorly maintained exteriors all fall under the bad neighbor category, according to the Appraisal Institute. It recommends that prospective buyers visit a neighborhood on several days at various times to get a good feel about the people who live there, and to find out what’s happening in the neighborhood. A home’s proximity to a bad neighbor also can impact the rate of potential decline in value.

“ I’ve seen many situations where external factors, such as living near a bad neighbor, can lower home values by more than 5 to 10 percent,” said Appraisal Institute President Richard L. Borges II. “Homeowners should be aware of what is going on in their neighborhood and how others’ bad behaviors could affect their home’s value.”

Appraisers refer to situations like these as an “external obsolescence”, meaning depreciation of a home’s value due to external factors not on the property. External obsolescence may be caused by economic or locational factors, and may be temporary or permanent, but it is not curable by the owner, landlord or tenant, according to The Appraisal of Real Estate,13th Edition (Appraisal Institute, 2008).

Here are some tips from the Appraisal Institute for homeowners dealing with troublesome neighbors:

Speak with other neighbors. Get consensus when identifying issues, and approach the bad neighbor together.

Look up original and updated subdivision restrictions. If talking to the neighbor doesn’t work, see if they’re violating any restrictions. If so, writing to the code office of the municipality and reporting the bad neighbor could spur an investigation into the nuisance.

Depending on the offense, a call to the local health department also may be warranted.

Hire an attorney. If all else fails, the cost of an attorney likely will be less than the home’s potential loss in value.

“Even though homeowners do have some recourse, it’s important for prospective homebuyers to carefully examine the neighborhood where they’re considering living,” Borges said. “That way they can hopefully prevent any problems in the first place.”

Potential homebuyers also should be aware of a property’s proximity to commercial facilities, such as power plants and funeral homes, as these also can negatively affect a home’s value.